NZD/USD Technical Strategy: NEUTRAL
- NZ Dollar remains mired in a narrowing range vs US counterpart
- Double top below 0.70 might still happen but confirmation needed
- Narrowing coil undermines risk/reward setup absent a breakout
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The New Zealand Dollar continues to struggle with establishing a clear-cut directional bias against its US counterpart. The case for a double top below the 0.70 figure remains broadly intact, with a series of lower highs following the appearance of a Bearish Engulfing candlestick pattern. A matching series of lower lows is struggling to take root however, with uptrend support set from October conspicuously intact.
At this stage, confirmation of a reversal seems like it needs a daily close below both that trend line – where the outer layer of support is now at 0.6730 – as well as the 0.6700-20 chart inflection area. Doing so would probably set the stage for a challenge of the 0.6591-0.6619 zone. Alternatively, a breach above the 0.6893-0.6903 region opens the door for another challenge of the would-be double top in the 0.6942-69 band.
An actionable trade setup appears to be absent at this time. Traders will likely need a defined breakout one way or another to show directional conviction. In fact, even a shorter-term tactical bet seems unattractive as the narrowing space between immediate support and resistance undermines risk/reward parameters. With that in mind, patience on the sidelines might be seen as prudent.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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